New FATF guidelines require professional crypto consultation

The latest Financial Action Task Force (FATF) guidelines have scared the various crypto companies due to stricter checks on exchanges and operations of virtual assets. The multi-government body now wants digital currency companies to work in partnership with blockchain analysis firms, traditional financial companies, and other cryptocurrency organizations.

At the same time, these latest FATF guidelines promote a whole new range of companies to enter the cryptocurrency ecosystem and earn handsome profits from crypto consultation.

Stricter FATF guidelines for cryptocurrency exchanges

While these guidelines may seem new, many countries – including Japan and U.S.A. – already enforce many similar regulations with regards to crypto realm such as ‘anti-money laundering’ (AML) and ‘Know Your Customer’ (KYC) norms. That being said, there are additional new restrictions as well, which focus on making key improvements in the way virtual asset service providers (VASPs) operate across the globe.

Transaction monitoring will be strengthened to detect possible criminal patterns. Money transmitters and exchanges will now adhere to ‘travel rule’ to confirm the identity of both the parties involved in the transaction.

When it comes to cryptocurrency exchanges specifically, it is expected that professional financial services firms will provide much more clarity as to what the new regulations will mean exactly. Regulators and crypto associations will decipher the precise impact of new regulations concerning their specific operations.

Convener of the V20 summit and Blockchain Australia president, Ron Tucker, states that the V20 summit helped clarify the apprehensions surrounding the new rules. A new VASP association was created by signing a ‘Memorandum of Understanding’ and named International Digital Asset Exchange Association (IDAXA).

Enter the middlemen – Opportunity for crypto consultation

The new FATF rules will provide an opportunity for various professional consulting firms such as PWC, Norton Rose Fulbright, and Deloitte. They will serve as a bridge between FATF guidelines and VASPs. And hiring them isn’t going to be economical in any sense.

Besides the middlemen, the crypto exchanges will incur costs on building new infrastructure to comply with rules. Significant industry-wide collaboration will be required to create more transparency with regards to transactions in this realm.

Mutually agreed-upon governance models and cross-platform monitoring will be the key. Automated transaction monitoring to identify counterparties and comply with monitoring obligations will have to be developed in consultation with professional financial institutions.

Many financial services firms are seeing a growth opportunity in new FATF rules. No wonder exchange profits will depend on its compliance with the FATF’s latest rules.

In developing countries, some leeway can be expected in terms of interpreting the new guidelines. Despite the room for arbitrage and leeway, these new FATF rules are certain to spook the industry for some time at least.

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About The Author

Gurpreet Thind is pursuing Masters in Electrical Engineering at University of Ottawa. His scholarly interests include IT, computer languages and cryptocurrencies. With a special interest in blockchain powered architectures, he seeks to explore the societal impact of digital currencies as finance of the future. He is passionate about learning new languages, cultures and social media.